AUGUST 24, 1998
Keep an eye on Dunlop
IN February we predicted that Goodyear could buy the Dunlop tire company and switch its Formula 1 tire program from Goodyear branding to that of Dunlop. The American tire company has announced its intention to double its sales within five years and the only logical way that this can be achieved is through a program of acquisitions. The most obvious target for Goodyear is Dunlop, which is owned by the Japanese trading conglomerate Sumitomo. Talks have been taking place for some months and the word in tire circles is that the deal is likely to be completed next Spring. Things may, however, have been speeded up in recent weeks by the downturn of the Japanese economy. In recent days the Sumitomo Bank - which is at the center of the group - was one of several Japanese banks to begin selling off its bad debts, in the face of the weakening of the yen. The aim is to rid the empire of its less efficient businesses and bolster other areas in which Sumitomo is stronger.
The sale of Sumitomo Rubber Industries - which owns Dunlop - would fall into this category and with the yen weakening the faster the business can be sold the better the result will be for Sumitomo.
Goodyear, in the meantime, continues to expand in Asia - which is now a buyer's market - and last week raised its stake in Nippon Giant Tire, buying the shares previously owned by the Mitsubishi conglomerate, which is also in the process of slimming down.
Since Goodyear's decision to withdraw from Grand Prix racing at the end of last year there has been a lot of internal discussion going on about whether the company should reverse its decision. We believe that the pro-F1 lobby has mounted quite a successful campaign to convince the chairman Sam Gibara to change his mind and utilize the resources that Goodyear has spent many years developing in Grand Prix racing.
But a change in policy would not be a good political move and thus Gibara may be looking for a way of keeping the racing program going without being seen to do an about-turn. The purchase of Dunlop would provide him with that opportunity - but only if the deal can be done quickly.
Reorganizing the Formula 1 program would be very simple as the research and development could continue to be done in Akron, Ohio, while the distribution side of the operation could be run from Goodyear Racing's base in Wolverhampton, England, which is conveniently located close to Dunlop Racing's British headquarters.
One way or another, a decision about the future has to be made quickly as F1 chassis designers need to know which tires they will be running with in 1999. Having said that Benetton proved this year that the decision can be taken quite late in the day as it did not opt for Bridgestone tires until after Christmas.
This news will not please Bridgestone bosses who have been trying to get a definitive answer out of Goodyear about whether or not the company is planning to quit F1. Goodyear staff say that the decision was made at the end of last year and has not been changed.
Bridgestone racing staff are very keen that there is continued competition next year in F1 because the tire war is generating more interest than ever before. If there is only one tire company that coverage will quickly stop.
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